United States v. Tidewater Marine Service, Inc., Civ. A. No. 68-97.

• Decision Date: 12 April 1968
• Docket Number: Civ. A. No. 68-97.
• Citation: 284 F. Supp. 324
• Parties: UNITED STATES of America v. TIDEWATER MARINE SERVICE, INC., Twenty Grand Marine Service, Inc., Tidex, Inc., and Pan Marine Service, Inc.
• Court: U.S. District Court — Eastern District of Louisiana

284 F. Supp. 324

UNITED STATES of America v. TIDEWATER MARINE SERVICE, INC., Twenty Grand Marine Service, Inc., Tidex, Inc., and Pan Marine Service, Inc.

Civ. A. No. 68-97.

United States District Court E. D. Louisiana, New Orleans Division.

April 12, 1968.

COPYRIGHT MATERIAL OMITTED

Louis C. LaCour, U. S. Atty., New Orleans, La., Milton J. Grossman, Harrison J. Sheppard, Joel R. Bennett, U. S. Dept. of Justice, Washington, D. C., for United States.

Louis B. Porterie, Duke & Porterie, New Orleans, La., Robert A. Bicks, Robert J. Bagdasarian, David S. Patterson, Breed, Abbot & Morgan, New York City, for Tidewater Marine Service, Inc., and Tidex, Inc.

Charles Kohlmeyer, Jr., Lemle & Kelleher, New Orleans, La., for Twenty Grand Marine Service, Inc., and Pan Marine Service, Inc.

HEEBE, District Judge:

This cause came on for hearing on January 26, 1968, on the plaintiff's motion for a preliminary injunction. We denied the motion on February 9, 1968, for reasons fully explained herein.

REASONS

The United States instituted this suit to enjoin a proposed merger between Tidewater Marine Service, Inc. (Tidewater) and Twenty Grand Marine Service, Inc. (Twenty Grand) under an agreement entered into between these companies on August 25, 1967, on the grounds that the proposed merger may substantially lessen competition or tend to create a monopoly in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. The same relief is sought for the same reason against the proposed acquisition by Tidex, Inc. (Tidex) of all the outstanding shares of stock of Pan Marine Service, Inc. (Pan Marine), affiliated corporations of Tidewater and Twenty Grand respectively, which plan to effectuate the proposed stock acquisition when the Tidewater-Twenty Grand merger is consummated.

Tidewater is primarily engaged in the business of providing supply and utility boats, crew boats, tugboats, and other marine equipment to oil companies, drilling contractors, and others engaged in the offshore exploration, recovery and production of petroleum products, and to companies engaged in oceanographic research. The vessels chartered by Tidewater include large supply boats used to carry drill pipe, drilling mud, diesel fuel, drilling water, and miscellaneous equipment from shore to offshore drilling rigs which are located up to 100 miles off the Gulf Coast; launches for transporting personnel and food to offshore platforms; tugboats used to tow barges and drilling platforms; and barges for transporting oil and other products. Approximately 75% of Tidewater's boats are service craft used to carry personnel and supplies; tugboats and barges constitute the bulk of the remaining 25%. Tidewater operates off both the Gulf Coast and West Coast of the United States (including Alaska) as well as in and around Canada, Mexico, Nigeria, Trinidad, Venezuela, Africa, the Persian Gulf, the Gulf of Suez and the North Sea. Approximately 68% of its revenues are derived from its operations in the coastal waters of the United States.

While the bulk of Tidewater's business consists of chartering offshore service craft to transport personnel and supplies, Twenty Grand secures only approximately 30% of its revenues from the chartering business and only slightly less than 30% of its vessels are engaged in this activity. The remainder of Twenty Grand's revenues are acquired from offshore towing (about 40%) and inland operations (about 30%). Twenty Grand operates its charter business principally in the coastal waters of the United States, but like Tidewater, although not nearly as extensively, also conducts some business in foreign waters.

Practically all of the boats chartered or leased by Tidewater and Twenty Grand for operation in the coastal waters of the United States are chartered under bareboat charter. This is a charter whereby the chartering firm leases the vessel without crew or supplies to a customer, and the customer mans, maintains and operates the vessel either directly or through an operator for the duration of the charter. In almost all cases Tidewater's customers enter into a contract with Tidex or one of its subsidiaries whereby Tidex or the subsidiary mans, operates and maintains the vessel for the chartering party.¹ Similarly, Pan Marine is usually the operating company for boats chartered by Twenty Grand.

The government alleges that the proposed merger between Tidewater and Twenty Grand and the acquisition of Pan Marine's stock by Tidex may substantially lessen competition or tend to create a monopoly in the chartering and operation of offshore tugboats as well as supply and utility boats used to transport cargo and equipment in connection with petroleum operations offshore the United States, offshore the Gulf Coast of the United States and offshore the Pacific Coast of the United States in violation of Section 7 of the Clayton Act in that it will (1) eliminate actual and potential competition between Tidewater and Twenty Grand and between Tidex and Pan Marine, and (2) further increase industry-wide concentration. On this basis the government seeks to enjoin the proposed merger and stock acquisition.

I. RELEVANT PRODUCT MARKET

Section 7 of the Clayton Act provides in pertinent part:

"No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." 15 U.S.C. § 18.

It is essential that the government establish the "line of commerce" or "relevant product market." United States v. E. I. Du Pont De Nemours & Co., 353 U.S. 586, 593, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957). We are presently concerned only with the phase of defendants' operations which involve chartering service craft to transport men and supplies to the offshore oil industry.² The government contends that the relevant line of commerce consists of furnishing offshore supply and utility vessels used to transport cargo and equipment. The defendants, on the other hand, maintain that it consists of supplying offshore service craft to carry both personnel and cargo. Inasmuch as the government contends that the transportation of cargo is the relevant product market, the optimum approach would have been to determine the amount of cargo that was transported to offshore facilities and the competitive position of defendants relative to that total. However, for obvious reasons this was impractical, and the government sought instead to measure the alleged line of commerce by the number of supply and utility boats engaged in the business. The approach of counsel for all parties herein was thus directed to the boats themselves rather than transportation per se as the line of commerce. We will also adopt this approach because it affirmatively appears from the evidence herein that the transportation of cargo via boats other than supply and utility boats is so slight as to be relatively insignificant when compared to the amount of cargo transported by supply and utility boats. Thus, supply and utility boats are not merely a unit of measurement but may themselves be considered, for practical purposes, as the line of commerce as the following factors indicate.

There are three basic types of service craft used to provide offshore transportation — supply boats, utility boats, and crew boats. While the three basic types are recognized throughout the marine transportation and offshore oil industries, they may be referred to by different names; for example, supply boats may be called cargo boats, utility boats may be called standby boats or production boats or work boats or supply-personnel boats, and crew boats may be called personnel carriers or launches.³

Each type of boat is intended to perform a different function, and thus there are significant differences in their design and construction, the most striking differences being between supply boats and crew boats. Crew boats are designed to carry a large number of passengers at high speeds. Considering that as many as fifty men may be transported at any one time, there is considerable cost involved in transporting personnel, especially for an operation which is some distance offshore, because the companies operating offshore oil facilities have to pay the workers, who work in shifts of so many days, while they are traveling to and from shore. Thus, speed is essential. In addition to transporting crew shifts, crew boats are continuously used to transport miscellaneous personnel in emergency and other situations where speed is also at a premium. Consequently, crew boats are generally highpowered vessels with planing hulls constructed of lightweight aluminum for maximum speed approaching 30 m. p. h. They are also constructed with passenger comfort in mind; for example, the seats are often the reclining type. Crew boats are also capable of carrying small amounts of cargo, such as groceries and small tools, varying in weight but seldom exceeding five tons.

Supply boats, on the other hand, are designed for transporting large quantities of cargo ranging up to 600 tons in weight. Thus, they are generally steel hulled vessels built for maximum stability under all conditions. They are usually capable of making only 10-12 knots. Supply boats sometimes carry passengers when it would be more convenient to do so or when inclement conditions prohibit a crew boat from making the journey. Utility boats are designed with facilities to accommodate as many as 40 passengers, although the number is usually smaller. But because utility boats are also designed to carry large amounts of cargo, generally slightly less than one-half as much as supply boats, they are also...